Would you pay your employees three years of their salaries in advance? If your answer to this is, “No,” then equipment leasing might be right for you.
My favorite analogy is that you need to look at your equipment the same way as you would look at an employee. Equipment is something for which you pay to help generate income for your business.
So, why purchase your equipment and spend thousands of dollars today, when you can lease it and let it pay for itself over the term of the lease? By leasing your equipment, you can avoid spending extra money that will adversely affect your cash flow.
Advantages of Leasing
– The primary advantage of leasing your fitness equipment is that it allows you to acquire assets now; with minimal up-front expenditures. Most equipment leases only require a small deposit.
– How many times have you lost your club members to the newer club that just opened up because they had more advanced equipment? Imagine if you took advantage of equipment leasing to stay a step ahead!
– Another financial benefit of equipment leasing is that your lease payment is generally considered to be a rental expense. Thanks to this tax advantage, it helps reduce the net cost of your lease.
– In addition, a commercial equipment lease will not affect your personal credit (like a bank loan or credit card would). This helps immensely, if you decide to buy or refinance a home, etc.
– Leases are generally easier to obtain than bank lines and sometimes can be accomplished with an application only.
Disadvantages of Leasing
– The overall cost of buying equipment can be less if you pay cash up-front to purchase the equipment versus leasing it. When leasing, you are committing to payment terms, and most leases cannot be cancelled, which means if you commit to 36 monthly payments, then you are liable for that – whether you continue using the equipment or not.
– Tax incentives are another good reason to consider purchasing. Section 179 of the Internal Revenue Code allows you to fully deduct the cost of some newly purchased assets in the first year (In 2007, you can deduct up to $112,000 in equipment.). Although not all equipment is eligible for Section 179 treatment, you can still receive tax savings for almost any business equipment through depreciation deductions.
When an outright purchase of equipment is not the best option for your club, consider leasing your equipment as an alternative. Equipment leasing can help generate income for your business!
Debbie Neumann is the Director of Financing for Amerifund. She can be contated at 800.211.3071, or by email at debbie@amerifund.cc, or visit www.amerifund.cc.
